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Free  Coinage  of  Silver 


THE 


U-\  ~ 


m 


UIN 


K.  J.  DONNELL. 


Reform  Club  Sound  Currency  Committee, 


NZW  YORK. 


v 


Free  Coinage  of  Silver  the  Ruin  of  all  Credit./ 


I  have  been  requested  by  some  friends  to  write  something 

on  the  silver  question.  I  confess  I  do  so  with  reluctance,  for 

this  reason  :  For  more  than  seven  vears — from  1881  to  1888 — 

«/ 

I  had,  in  speech  and  writings,  been  warning  my  countrymen 
against  the  dangers  of  the  free  silver  propaganda  begun  and 
carried  on  with  such  extraordinary  ingenuity,  activity,  and 
perseverance,  and  lavish  expenditure.  The  great  success  of 
the  silver  mines,  and  the  little  support  I  received  from  those 
opposed  to  them,  and  especially  the  events  of  the  last  few 
years,  convinced  me  that  I  had  been  wasting  time,  without 
benefit  to  either  myself  or  the  public.  Ignorance  of  the  funda¬ 
mental  principles  of  economics  kept  the  advocates  of  sound 
money  on  the  defensive.  I  knew  that,  in  politics,  a  defensive 
war  is  always  a  losing  war. 

In  the  Spring  of  1 888  I  delivered  a  lecture  before  the  Re¬ 
form  Club  in  this  city,  in  which  I  predicted  substantially  every¬ 
thing  that  has  since  taken  place  in  connection  with  the  free 
silver  propaganda.  What  I  have  to  write  now  will  be  little 
more  than  a  restatement,  in  the  light  of  accomplished  facts,  of 
the  principles  upon  which  I  then  founded  my  predictions.  My 
leading  thought  was  that  the  free  silver  propaganda  was  an 
attack  on  credit,  which,  if  successful,  must  result  in  general 
bankruptcy.  From  this  we  have  been  saved,  at  least  tempo¬ 
rarily,  by  the  bold  and  resolute  action  of  President  Cleveland. 

The  great  danger  of  Democratic  self-government  in  questions 
of  finance  is  that  the  masses,  especially  the  agriculturists,  have 


4 


no  adequate  appreciation  of  the  supreme  importance  of  credit. 
Credit — mutual  confidence  between  men  and  nations — is  the 
foundation  upon  which  rests  modern  industry  and  commerce, 
in  fact,  all  that  is  known  as  civilization.  Money  is  nothing 
more  nor  less  than  the  highest  form  of  credit.  When  credit 
is  shattered,  money  disappears  as  it  did  in  the  Middle  Ages. 
When  a  panic  results,  even  fictitious  money  is  hoarded,  as  it 
was  during  the  last  Congress. 

I  have  been  surprised  to  see  that  the  low  prices  of  our  lead¬ 
ing  agricultural  products  have  been  attributed,  even  by  our 
professional  economists,  to  overproduction,  and  nothing  else. 

I  cannot  speak  of  wheat  with  confidence  derived  from  per¬ 
sonal  knowledge,  but  I  can  speak  of  cotton  with  some  claim  to 
authority  derived  from  fifty  years’  experience,  observation  and 
study.  I  consider  it  morally  certain  that  the  attitude  and  con- 
duct  of  the  last  Congress  on  the  silver  question  cost  the  cotton 
planters  on  the  last  two  crops  alone  at  least  $100,000,000. 

The  first  Bland  silver  purchase  bill  was  at  once  recognized 
\>y  well-informed  economists  as  a  menace  to  credit.  It  was  a 
storm  cloud,  small  at  first,  but  ever  increasing,  until  the  pass¬ 
age  of  the  Sherman  silver  purchase  bill,  when  it  rapidly  spread 
over  the  whole  heavens/  The  silver  men  were  confident  that 
the  law  would  raise  the  value  of  silver  bullion  to  a  parity  with 
gold  at  the  ratio  of  16  to  1.  The  event  was  directly  opposite. 
It  is  reasonably  certain  that,  if  the  Government  had  not  inter¬ 
fered,  much  capital  and  labor  would  have  been  transferred 
from  silver  mining  to  gold  mining,  and,  under  the  operation 
of  natural  laws,  gold  and  silver  would  have  been  much  nearer 
to  each  other  in  intrinsic  value  than  they  are  now. 

At  the  root  of  all  our  economic  heresies  is  the  popular 
belief  that  values  can  be  not  only  regulated  but  created  by 
law.  Unfortunately  this  delusion  has  been  indorsed  and 
propagated  by  the  Supreme  Court’s  decision  that  Congres 
had  the  constitutional  right  to  declare  Governmental  promises 


5 


to  pay  (greenbacks)  a  legal  tender.  This  decision  was  forced 
upon  the  court  by  the  short-sighted  statesmanship  of  the  time. 
It  was  then  deemed  expedient  to  declare  war  measures  con¬ 
stitutional  from  fear  of  upsetting  conditions  which,  for  the 
time  being,  were  satisfactory. 

I  doubt  if  there  be  in  all  history  a  more  convincing  object 
lesson  of  the  supreme  economic  value  of  credit  than  was  fur¬ 
nished  by  our  treatment  of  the  national  debt  incurred  in  the 
prosecution  of  the  war,  and  the  results  from  that  treatment. 
A  large  part  of  our  bonds  wTas  sold  at  an  average  value  of  fifty 
cents  on  the  dollar.  Most  of  them  were  bought  back  at  an 
average  of  one  hundred  and  twenty.  This  gave  us  command 
of  nearly  the  whole  surplus  capital  of  Europe,  which  was  the 
main  cause  of  our  wonderful  industrial  development  during 
twenty  years.  That  free  inflow  of  European  capital  wTas 
extremely  profitable  to  us,  but  was  also  a  danger.  Boundless 
credit  is  a  fool’s  paradise.  Credit  can  only  be  preserved  by 
using  it  wfisely.  When  so  used  it  can  never  cost  more  than  it 
is  worth,  and  it  is  the  only  economic  value  of  which  that  can 
be  said  truly.  The  late  restoration  of  confidence  by  the 
European  gold  loan  is  only  a  more  convincing  proof  of  the 
value  of  credit,  because  it  is  recent.  " 

The  lowest  price  known  for  middling  in  the  Liverpool  mar¬ 
ket  previous  to  the  present  season  was  in  1845,  when  it  aver¬ 
aged  3  92-100  pence.  The  lowest  was  3J  pence;  the  lowest 
price  in  this  market  was  5|  cents.  It  was  at  a  time  of  general 
bankruptcy.  Most  of  our  banks  had  suspended,  and  bank 
notes  were  either  worthless  or  selling  at  a  heavy  discount. 
The  lowest  price  in  Liverpool  this  season  was  3  y>ence,  and  in 
this  market  5  7-16  cents.  It  would  seem  from  this  that  in  the 
past  fifty  years  the  cost  of  transportation  and  exchanges  had 
been  reduced  more  than  1J  cents  per  pound.  The  startling 
fact  is  that  the  whole  of  this  saving  has  gone  to  the  benefit  of 
consumers  and  no  part  of  it  to  the  profit  of  producers. 


I  cannot  doubt  but  that  this  was  mainly  owing  to  the  disor¬ 
ganization  of  credit  in  this  country.  The  free-silver  agitation 
\lias  kept  our  people  in  a  panicky  condition  for  several  _years. 
During  tile  last  two  to  four  years  we  were  on  the  perilous 
edge  of  bankruptcy.  Previously  people  had  treated  the  silver 
propaganda  as  a  passing  folly  unworthy  of  serious  attention. 

I  feel  sincere  affection  for  my  countrymen  of  all  classes,  and 
I  wish  to  speak  of  them  as  I  feel,  but  I  must  confess  that 
many  sensible  patriotic  people  concluded  that,  if  the  last  Con¬ 
gress  fairly  represented  the  popular  sentiment  of  the  South 
and  West,  our  fellow-citizens  of  the  South  and  West  have 
been  demented.  During  nearly  the  whole  of  the  last  Congress 
we  were  drifting  toward  general  bankruptcy,  yet  Congress 
refused  to  give  the  Administration  the  means  of  preserving 
the  national  credit.  Nothing  like  this  has  ever  been  seen  in 
this  country  or  in  the  modern  world. 

The  only  cloud  that  now  darkens  the  horizon  of  the  future 
is  the  dreaded  meeting  of  the  next  Congress,  which  is  reported 
to  be  even  more  demented  on  the  silver  question  than  was  the 

A. 

last.  If  there  should  be  no  change  for  the  better  our  last  con¬ 
dition  would  be  worse  than  the  first.  The  danger  is  greatly 
increased  by  the  apparent  fact  that  there  is  but  one  man’s  life, 
like  that  of  President  Cleveland’s,  between  us  and  a  silver 
basis. 

_ _  A  majority,  or  at  least  a  large  minority,  of  our  politicians 


have  committed  themselves  unequivocally  to  free  coinage. 
They  consequently  considered  their  political  fortunes  involved 
in  its  success  or  failure.  Will  they  have  the  manliness  to  ac¬ 
knowledge  their  error?  Doubtless  many  will.  The  mass  of 
the  Southern  people  want  more  money,  even  if  it  be  fictitious 
money.  If  nothing  else  would  satisfy  them,  I  would  advocate 
the  unconditional  repeal  of  the  tax  on  State  bank  issues  and, 
simultaneously,  the  redemption  and  destruction  of  all  the 
legal-tender  obligations  of  the  Government.  If  the  State 


9 


US 

( 

banks  are  permitted  to  issue  paper  that  does  not  command 
public  confidence,  people  need  not  accept  it.  It  is  to  be  hoped 
that  the  memory  of  ante-war  times,  and  especially  the  catas¬ 
trophe  of  1837,  will  prevent  them  from  repeating  the  folly  of 
those  times.  It  is  still  probable  that  they  will  be  willing  to 
submit  to  some  sort  of  governmental  supervision  such  as  will 
inspire  general  confidence. 

There  is  in  the  world  a  vast  mass  of  jfioaf.i  n  g  na  pi  fa  i  T  increas¬ 
ing  continually,  and  more  and  more  rapidly  as  industry  and 
science  advance.  This  floating  capital  is  bound  to  no  country 
in  particular.  It  is  constantly  seeking  everywhere  for  either 
the  most  profitable  or  safest  investments.  It  will  desert  any 
country  or  community  that  fails  to  protect  it.  The  country  or 
community  that  would  avail  itself  of  the  benefits  of  the  use  of 
this  floating  capital  must  elevate  its  credit  to  the  highest  stan- 
dard.  The  first  condition  of  such  credit  is  sound  money,  the1 
right  definition  of  which  is  money  that  commands  universal 
confidence ;  not  money  that  has  the  confidence  of  a  single 
community  or  nation  alone,  but  of  all  nations.  There  is  but 
one  standard  of  value  that  meets  this  requirement,  viz.,  gold. 
The  leading  industrial  nations  have  been  forced  to  recognize 
this  truth. 

The  floating  capital  of  the  world  is  all  based  on  gold  values. 
It  will  be  loaned  on  that  basis  or  not  at  all.  A  few  may  specu¬ 
late  on  the  chances  of  a  fluctuating  currency,  but  always  with 
a  large  margin  of  profit  to  protect  them  from  possible  loss.  I 
use  the  term  basis  of  gold  values  because  thousands  of  millions 
of  transactions  in  commerce  and  finance  are  consummated 
without  the  use  of  the  metal.  The  unquestioned  recognition 
of  the  gold  standard  is  generally  sufficient  with  a  very  small 
percentage  of  the  metal. 

The  reason  why  money  can  be  borrowed  on  time  in  New 
York  at  3  per  cent,  per  annum,  and  in  remote  agricultural  dis¬ 
tricts  can  hardly  be  borrowed  at  all,  is  obvious.  In  the  former 


8 


the  security  is  satisfactory,  and  the  obligation  of  the  borrowe 


to  return  the  same  kind  of  money  he  borrows  is  not  questioned 
by  anybody ;  '  the  latter  the  mania  for  a  depreciated  cur 3 


rency  undermines  confidence  and  destroys  credit. 


What  would  be  the  effect  of  the  silver  standard  on  the  basi 


^>f  16  to  1?  It  would  not  advance  the  gold  value  of  silver,  on 
\if  it  should,  it  would  be  only  temporarily,  consequently  our 
($540,000,000  of  silver,  every  dollar  of  which  now  discharges 
the  functions  of  gold,  would  then  be  reduced  to  $270,000,000 
actually.  This  of  itself  would  cause  a  terrible  contraction,  the 

i/  • 

world  would  be  still  conducted  on  the  basis  of  gold  values,  and 
the  crushing  effect  of  the  contraction  and  loss  of  credit  would 
fall  on  the  masses  of  industrious  people.  The  fearful  injustice,! 
not  to  say  robbery,  to  the  wage  earners,  the  widows  and  orphans 
dependent  on  life  insurance  for  their  future  protection  from! 
want,  the  depositors  in  savings  banks,  in  trust  companies,  ami 
banks  of  deposit,  has  been  amply  discussed  by  others ;  it  needa 
only  to  be  named  here.  The  government  and  people  thal 
would  be  guilty  of  such  robbery  would  neither  have  noa 
deserve  credit.  I  cannot  believe— it  is  not  possible — that  thJ 


American  people  could  ever  be  consciously  guilty  of  such  a 
crime.  Nor  can  anv  man  who  would  advise  it  ever  retain  tliei J 


nfidence. 

In  the  early  days  of  Gen.  Jackson’s  political  career,  he  de 


nounced,  with  all  the  vehement  energy  of  his  character,  th 


stay  laws  they  proposed  for  the  relief  of  debtors.  Ills  life  was 


threatened  in  vain,  and  never  afterward  did  the  American 
people  either  condemn  his  course  or  doubt  his  integrity. 

(For  price  list  of  Sound  Currency  literature  address  Reform  Clul 
Office,  5*4  William  st..  New  York  City.) 


UNIVERSITY  OF  ILLINOIS-URBANA 


3  0112  055458696 


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